The Government has embarked on a big sell-off as it has reduced its stake in Royal Mail and has announced it will start selling down its 79 per cent holding in Royal Bank of Scotland in the coming months.

The announcement also follows the sale of more shares in Lloyds Banking Group last night, which took the Government’s holding in the lender down to just under 18 per cent.

Taxpayers will make a loss from the sale of RBS stake unless the share price soars rapidly: it is currently around 360p, 28 per cent lower than the 500p that would be needed for the Government to recoup its investment.

Share sale: Taxpayers will make a loss from the sale, which will be open to financial institutions only

George Osborne said the first share offering would be to financial institutions only, but that future disposals could include ordinary investors. He also said that the sell-off would take ‘some years’ to complete.

Meanwhile, the Government sold half of its remaining 30 per cent stake in Royal Mail to institutional investors, such as pension funds, raising £750million.

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Some 15 per cent of the group has been sold at 500p a share - a slight discount to last night's closing price of 516.5p. A further 1 per cent will be given to postal workers across, adding to the 10 per cent awarded to employees when the coalition government began the flotation of the then-state-owned firm in 2013.

Members of the public were not involved in this latest share placing, although there will be further stake sales as the Government has said it intends to offload the rest of its remaining stake.

Shares in Royal Mail were down more than 4 per cent, or 21.35p at 495.15 in mid-morning trading.

The Government is pressing ahead with the sale of its holdings as it looks at ways to find the money to reduce the UK deficit, which is one of the highest in Europe.

The UK racked up a deficit of 5.7 per cent of gross domestic product last year while the national debt soared to 89.4 per cent of national income, according to recent Eurostat data.

RBS was rescued by the Labour government in 2008 following the financial crash with a £45.5billion bail-out, but the bank’s market value today is about half that sum at around £23billion.

In 2008 the government injected £45billion of taxpayers money into RBS to prevent the bank from collapsing in the aftermath of the financial crisis, but the bank’s market value today is about half that sum at around £23billion.

The RBS share price is today up by around 1 per cent at 359.49p, after reaching 362.25p earlier in the session.

Big sell-off: George Osborne is pressing ahead with the sale of the Government's holdings to raise money to reduce the UK deficit

But George Osborne said that taxpayer’s loss would be more than offset by the profits on the other bank share sales, including its stake in Lloyds.

Mr Osborne said: ‘In the coming months we will begin to sell our stake in RBS. It's the right thing to do for British businesses and British taxpayers.

‘Yes, we may get a lower price than Labour paid for it. But the longer we wait, the higher the price the whole economy will pay.’

‘And when you take the banks in total, we're making sure taxpayers get back billions more than they were forced to put in.’

But Chris Leslie, Labour's shadow chancellor, said a premature sale posed risks for the taxpayer as RBS was still restructuring its business and awaiting a US settlement for the mis-selling of sub-prime mortgages.

‘It is highly dubious for the Chancellor to claim that significant losses on RBS are somehow acceptable because a gain can be made selling Lloyds or other completely separate assets.

‘The Chancellor said two years ago that he would only countenance a sale of RBS when “the bank is fully able to support our economy and when we get good value”. Neither of these tests have yet been passed.’

Royal Mail: The Government sold half of its remaining 30 per cent stake in the group to institutional investors

Labour is also critical of the ‘botched fire sale’ of Royal Mail, arguing that ministers had failed to learn the lesson from the initial sale, when shares soared immediately, leaving investors with an instant profit at the expense of taxpayer.

Shares in the group have risen around 20 per cent since the start of the year. They are now more than 50 per cent higher than they were when the rest of the company was floated in 2013.

The latest share sale also comes after a year in which Royal Mail cut the number of employees by 5,500. It has around 143,000 staff in its main UK business. Mr Osborne first announced plans for the Government to sell its remaining stake in Royal Mail last week.

Shadow business secretary Chuka Umunna said yesterday: ‘It's disgraceful the Government is rushing to dump its stake in Royal Mail to City speculators without giving ordinary investors a look in.’

Research by the New Economics Foundation, an independent think-tank, claims that plans to sell off the RBS taxpayer stake would result in a total loss to the taxpayer of between £13billion and £26billion.

It described sell-off plans as the ‘reckless fire-sale of a vital economic asset’.

However, analysis by Bank of America Merrill Lynch has found that taking into account £5billion of fees and repayments made already as part of the bail-out takes the break-even price to 455p.

It is further suggested that if the start of a sale in stages prompts the share price to rise so that it averages out at the break-even by the end of the process, value for money could be achieved with the stock beginning to be sold off at as low as 360p.

Michael Hewson chief market analyst at CMC Markets said it was unlikely that the taxpayer would ever get all of its money back from the sale of RBS.

He said: ‘For a start we don’t really know what the counterfactual would be with respect to waiting. We could move higher, but we could also equally move lower.

Lloyds stake: The Government reduced its stake in Lloyds to just below 18% last night

‘The bank is a much smaller entity now than it was 7 years ago, and is still facing a shareholder lawsuit in the US with respect to its 2008 rights issue, which might add some uncertainty.’

Graham Spooner, investment research analyst at The Share Centre, remained cautious about RBS.

He said: 'It appears that the government feels the shares will be better off in the hands of investors.

'However, the sale is expected to a difficult one, as the bank is still on the road to recovery and has reported seven years of losses since the bail out.'

RBS has undergone major restructuring under chief executives Stephen Hester and now Ross McEwan, who is trying to shrink the group to focus on the UK.

But its attempt to return to a more normal business rather than one propped up by the taxpayer has been dogged by the legacy of misconduct of years gone by, as well as an outcry over its treatment of small businesses and claims of political interference.

The bank reported £3.5billion losses for last year, taking accumulated losses since the bail-out to nearly £50billion, exceeding the cash that has been put in by the Treasury.

RBS lags behind fellow bailed-out bank Lloyds, which has seen its Treasury stake cut from 43 per cent to just under 18 per cent, with another tranche of shares sold yesterday.

It means the taxpayer has now recouped around £11billion of the £20.5billion that has been put into it by the Government when it rescued it in 2009.

The Treasury has reduced its stake in Lloyds by 7 per cent over the last four months as part of a trading plan announced at the end of last year which entails a gradual sale of stock into the market.

Last week the Government confirmed it would launch a multi-billion pound ‘Tell Sid’ style share sale open to retail investors within the next 12 months, following a previous pledge by Chancellor George Osborne.

Speculation is that the sale will take place next March after the completion in December of the current trading plan to sell down some of the Treasury's stake, and following publication of the group's 2015 annual financial results.

The current plan has been due to finish on June 30 but was last week extended until December 31 after being hailed a ‘huge success’ by the Chancellor. Lloyds shares were 0.35p higher at 87.08p this morning.

Yesterday there were also talks about a possible sale of Northern Rock's £13billion loans vehicle Granite as it was reported that a group of institutions submitted bids to buy it.

Northern Rock and Bradford & Bingley were bailed out by the UK government in the aftermath of the financial crisis.